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Crypto Giant Grayscale Says Providing On-Chain Proof of Reserves Threatens Its Clients’ Security

Crypto Giant Grayscale Says Providing On-Chain Proof of Reserves Threatens Its Clients’ Security

Due to security risks, Crypto asset management giant Grayscale says it will not provide accurate on-chain proof of its reserves. Since the revelations that former crypto exchange FTX mishandled its customers’ funds, other exchanges and companies have provided proof of reserve to ensure customers’ creditworthiness. In a Twitter thread, Grayscale says all digital assets underlying its products are stored in the custody of the Coinbase Custody Trust Company, but for security reasons, the company does not release cryptographic proof of its reserves.

Grayscale says, “Coinbase frequently performs on-chain validation. Due to security concerns, we do not make chain wallet information or verification information publicly available via Proof of Crypto Reserve or other advanced cryptographic accounting practices. We know that the above This point will come as a disappointment to some, but the panic caused by others is no reason to bypass the complex safeguards that have been keeping our investors’ assets safe for years.

Grayscale is the largest public holder of BTC, according to BitcoinTreasuries.net, holding 635,256 coins, or more than 3% of the total supply. However, Grayscale’s bitcoin wallets are not well known to the public, unlike other big companies like Binance or Bitfinex. Grayscale states that it does not lend, trade, or restructure any of its digital assets and that all BTC in its Bitcoin Trust are the exclusive property of the Trust.

Each Grayscale digital asset product is structured as a separate legal entity: a legal trustee for each asset product and a limited liability company for each diversified digital asset product sponsored or managed by Grayscale Investments, but ultimately owns the product. Shareholders.

For example, this means Grayscale Bitcoin Trust (OTCQX: GBTC) owns Bitcoin and only Bitcoin and every stock as of 18th, 2022. To be clear, these digital assets are owned by GBTC and only GBTC.

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